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Lawsuit against Meta invokes modern portfolio theory to protect shareholders

corpgov.law.harvard.edu

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Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#21

Post by subradios »

flanflan wrote: post #13

I'm just a two-bit software engineer and not a lawyer but I'll go against the general flow of the rest of the posts here and say "this is interesting." Whether or not it will work is another question, but it seems like they are trying to establish some precedent that companies need to consider the downstream impacts of the things they do. I see posters here brushing off talk about mental health and political impacts…

The problem is that this creates an open ended obligation of companies to whatever common shareholders want in their dreams about Society, and are responsible for doing so.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#22

Post by dantheman »

qclibre22 wrote: post #16
anigbrowl wrote: post #14

Anyone who invested in Facebook directly (rather than via a managed or exchange-traded fund of some sort) did so with the expected awareness that all the voting stock was controlled by Zuckerberg personally. Effectively, FB is a corporate dictatorship and it's hard to have sympathy for people who put money into it during the good times and are now surprised to discover that they made a bad investment decision. https:…

Might be a good time to go back to one share one vote corporate structure.

You can choose to invest in companies with that structure and others can choose to invest in other structures...

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#23

Post by hn_throwaway_99 »

flanflan wrote: post #13

I'm just a two-bit software engineer and not a lawyer but I'll go against the general flow of the rest of the posts here and say "this is interesting." Whether or not it will work is another question, but it seems like they are trying to establish some precedent that companies need to consider the downstream impacts of the things they do. I see posters here brushing off talk about mental health and political impacts…

But the lawsuit isn't arguing that "companies need to consider the downstream impacts of the things they do." That's an argument to be made to governments that grant corporate charters (though, I'd note that some governments have recently gone in the opposite direction, e.g. prohibiting pension fund managers from considering anything besides financial returns in their decisions).

Instead, the lawsuit is trying to expand the concept of "fiduciary duty" to other aspects of shareholders lives. That is the part that a lot of us think is insane.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#24

Post by threeseed »

flanflan wrote: post #13

I'm just a two-bit software engineer and not a lawyer but I'll go against the general flow of the rest of the posts here and say "this is interesting." Whether or not it will work is another question, but it seems like they are trying to establish some precedent that companies need to consider the downstream impacts of the things they do. I see posters here brushing off talk about mental health and political impacts…

> Well if there is a measurable harm that can be traced back to a given company why shouldn't they be sued

They can be sued if there is a specific, measurable harm. And there are plenty of existing laws which facilitate this.

Not aware of any evidence this applies to Meta.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#26

Post by syrrim »

Kranar wrote: post #20
jbombadil wrote: post #15

Earlier quoted context omitted.

> This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own. This is my thinking as well. If I own stock of Coca Cola and Pepsi. Coca Cola comes up with a great product that eats a huge amount of market from Pepsi. According to this I sue Coca Cola for my losses on…

I don't think this lawsuit has much merit, but the lawsuit is arguing against damages to an overall portfolio. If a diversified portfolio consisting of Coca Cola and Pepsi was on the whole damaged due to the actions of Coca Cola against Pepsi, then the plaintiffs argue that Coca Cola would be liable for some part of that damage. If, however, Coca Cola's actions harmed Pepsi specifically but benefited the overall port…

It's an interesting perspective. There's probably a sense in which overall improving a diversified portfolio maps to improving society or the economy as a whole, rather than harming society to make a dollar. So whereas the lawsuit likely has no grounds, it might actually be a good thing if this was the way things worked.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#27

Post by threeseed »

cherioo wrote: post #3
cratermoon wrote: post #2

In simple terms, investors are suing because even though they might have made a boatload of cash from their investments in Meta, they ended up with a net loss overall because what Meta did to pump up the stock value ended up destroying the value of a lot of other things the investors had in their portfolios.

Wow, this seems bananas. The loss in value isn’t even other investment, but rather “mental health issues for millions of users and increasingly negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation”

Meta is really just a microcosm for the entire internet.

So if Meta is liable then surely every company involved in the foundation of the internet is as well e.g. Google, Microsoft, Cloudflare, ISPs etc.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#28

Post by socialismisok »

hn_throwaway_99 wrote: post #7

This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own. The consequences of that line of thinking are scary. I'm sure the vast majority of shareholders of most US companies own ICE cars. If a company decides to put a lot of effort into, for example, cheaper batte…

This is where capitalism naturally goes. Growth is the most important thing. We start to codify the expectation of growth into board responsibilities. Then we all accept that as normal. Once we've built the mental model there, it's not really that far to say they shouldn't hurt other companies if it costs them nothing.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#30

Post by flanflan »

hn_throwaway_99 wrote: post #23
flanflan wrote: post #13

I'm just a two-bit software engineer and not a lawyer but I'll go against the general flow of the rest of the posts here and say "this is interesting." Whether or not it will work is another question, but it seems like they are trying to establish some precedent that companies need to consider the downstream impacts of the things they do. I see posters here brushing off talk about mental health and political impacts…

But the lawsuit isn't arguing that "companies need to consider the downstream impacts of the things they do." That's an argument to be made to governments that grant corporate charters (though, I'd note that some governments have recently gone in the opposite direction, e.g. prohibiting pension fund managers from considering anything besides financial returns in their decisions). Instead, the lawsuit is trying to exp…

> But the lawsuit isn't arguing that "companies need to consider the downstream impacts of the things they do."

It seems like it is though? From the text of the article:

> These activities pose risks to political stability, public health, and rule of law, threatening the intrinsic value of the global economy and thus the value of diversified portfolios.

The argument they seem to be going after is that we live in a highly connected society and powerful companies with outsized influence can disrupt the global economy which therefore hurts their investments. Whether or not Meta has _actually_ done that is another question, but I think that this line of thinking is interesting.

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